When you are starting to build business credit, a credit card will likely be the first account you open. After using the card for a few months, it is time to apply for vendor or trade credit. Since you do not yet have strong profiles, some vendors may have you pay upon receipt before offering payment terms. Now is the time to get into great payment and credit management habits. With the right strategy, these steps will help build business credit.
A few things to understand about vendor credit:
- Very few vendors report to the business credit bureaus, you will need to ask questions about their reporting procedures before applying.
- You may need to use ‘starter vendors’ first. There are a handful of vendors who work with companies that have no credit profiles or trade history.
- Try and establish payment terms to help business credit. Most vendors offer net-15 or net-30 terms.
- If the creditor does report, ask them how often. Unlike personal credit, a lot of trade credit does not report monthly. You will find that many report quarterly.
- Remember, your credit is young. Be diligent with payments – nothing is worse for scores than an immature credit profile with delinquencies.
Once you start making payments on the new account, they will begin sharing data with the bureau(s). Pull your business credit reports 6 months after establishing vendor credit, or use a business credit monitoring program, to see how much it helped build your business credit and to make sure the information is accurate. Once credit profiles begin to thicken, scores and indexes will be tabulated and you will be in a better position to apply for loans, win project bids and profitable opportunities. If you are struggling with finding vendors who report, reach out to business credit experts for advice and services on how to build business credit.